Mature couple walking along marina; IRMAA

Some Medicare beneficiaries, particularly those enrolled in Medicare Part B (outpatient or doctor visit coverage) and/or Medicare Part D (prescription drug coverage), might be confused if their monthly payments seem a bit higher than they had originally expected because of IRMAA.

What Is IRMAA?

IRMAA stands for income-related monthly adjustment amount. IRMAA is an additional amount that some people might have to pay along with their Medicare premium if their modified adjusted gross income (MAGI) is higher than a certain threshold. IRMAA only applies to people who are enrolled in Medicare Part B and/or Medicare Part D.

IRMAA was first enacted in 2003 as a provision of the Medicare Modernization Act. This provision applied only to high-income enrollees of Medicare Part B. In 2011, IRMAA was expanded under the Affordable Care Act to include high-income enrollees of Medicare Part D as well.

The federal government under Presidents George W. Bush and Barack Obama expanded the eligibility of IRMAA payers to try to strengthen the financial stability of the Medicare program. The Obama administration did so as an attempt to save the federal government $20 billion over 10 years.

In most circumstances, the government pays a major share (about 75 percent) of your Part B and/or Part D coverage. If you have a larger income, you’ll have to pay a larger percentage share of your coverage. This larger share is your IRMAA. The government saves money by paying a smaller percentage of the share. You will have to pay IRMAA in addition to the typical premium price.

IRMAA isn’t actually part of your plan premium. Think about it this way: The initial premium payment you make is your share of your insurance costs, but when you pay it, the government has already paid its share, which adds up to the entire cost of the premium. IRMAA is basically the payment the government asks for when it realizes that you actually have more money than it initially thought.

If you think you will have to make IRMAA payments, keep reading for more information on what you might have to pay.

How Is IRMAA Calculated?

The government determines whether you qualify for IRMAA by finding your modified adjusted gross income (MAGI). Your monthly IRMAA payment for each year is determined by your MAGI from two years prior. Your MAGI is your adjusted gross income (AGI) with certain costs added back to it. Your AGI is a commonly used income figure to determine your income bracket for tax purposes. AGI includes your total income for a year with certain deductions subtracted. Your MAGI adjusts by adding some deductions back, and so it might, in some cases, be higher than your AGI. Most people’s MAGI is identical to or slightly higher than their AGI. Deductions added back to your MAGI can include:

  • Student loan interest
  • IRA contributions
  • Any passive income loss
  • Deductions for tuition and fees
  • Taxable social security payments

Below are the five income threshold tiers for 2018. The numbers depicted here are based on the Social Security Administration’s (SSA) most current records for 2017.

  • Tier 1 consists of individuals with MAGIs of less than $85,000 and married couples filing jointly with MAGIs of less than or equal to $170,000.
  • Tier 2 consists of individuals with MAGIs between $85,000 and $107,000 and married couples filing jointly with MAGIs between $170,000 and $214,000.
  • Tier 3 consists of individuals with MAGIs between $107,000 and $160,000 and married couples filing jointly with MAGIs between $214,000 and $320,000.
  • Tier 4 consists of individuals with MAGIs between $160,000 and $214,000 and married couples filing jointly with MAGIs between $320,000 and $428,000.
  • Tier 5 consists of individuals with a MAGI greater than $214,000 and married couples filing jointly with a MAGI greater than $428,000.

Beginning in 2020, there will be six income threshold tiers. These tiers could change in the future due to political and economic circumstances.

  • Tier 1 consists of individuals with MAGIs of up to $85,000 and married couples filing jointly with MAGIs of less than or equal to $170,000.
  • Tier 2 consists of individuals with MAGIs between $85,001 and $107,000 and married couples filing jointly with MAGIs between $170,001 and $214,000.
  • Tier 3 consists of individuals with MAGIs between $107,001 and $133,500 and married couples filing jointly with MAGIs between $214,001 and $267,000.
  • Tier 4 consists of individuals with MAGIs between $133,501 and $160,000 and married couples filing jointly with MAGIs between $267,001 and $320,000.
  • Tier 5 consists of individuals with MAGIs between $160,001 and $214,000 and married couples filing jointly with MAGIs between $320,001 and $428,000.
  • Tier 6 consists of individuals with a MAGI greater than $214,000 and married couples filing jointly with a MAGI greater than $428,000.

Keep in mind: Your IRMAA payments aren’t determined by how much money you made the previous year but rather your MAGI from two years ago.

As the cost of Medicare premiums for beneficiaries rise, IRMAA costs will rise for them as well. In 2020, there will be an increase of approximately 15 percent in IRMAA for Medicare Parts B and D  for incomes between $133,501 and $214,000.

Consult the chart below for more information on what your monthly adjusted amount might be in 2018. The chart is based on your filing status and yearly income for 2016.

File Individual Tax Return File Joint Tax Return File Married & Separate Tax Return You Pay (in 2018)
$85,000 or less $170,000 or less $85,000 or less Your plan premium
Above $85,000 up to $107,000 Above $170,000 up to $214,000 Not applicable. $13 + your plan premium
Above $107,000 up to $160,000 Above $214,000 up to $320,000 Not applicable. $33.60 + your plan premium
Above $160,000 up to $214,000 Above $320,000 up to $428,000 Above $85,000 up to $129,000 $54.20 + your plan premium
Above $214,000 Above $428,000 Above $129,000 $74.80 + your plan premium

Source: “Monthly premium for drug plans,” Medicare.gov

If you are on Medicare Part B or Medicare Part D, you will receive an “Initial IRMAA Determination Notice” from Social Security. It can arrive any time after you are enrolled in either Part B or Part D. This notice will tell you how much you’ll have to pay for your IRMAA. It’s very important that you keep this notice, especially if you need to refer back to it for appeals. (See the “How to Appeal IRMAA” section below for more information.)

The chart below shows Part D premium payments for 2018. These numbers are based on your 2016 tax return.

File Individual Tax Return File Joint Tax Return Part D Premium Payment
$85,000 or less $170,000 or less Your plan premium
$85,001 to $107,000 $170,001 to $214,000 $13 + your plan premium
$107,001 to $133,500 $214,001 up to $267,000 $33.60 + your plan premium
$133,501 to $160,000 $267,001 to $320,000 $54.20 + your plan premium
Above $160,000 Above $320,000 $74.80 + your plan premium

Source: “2018 Medicare Amounts,” Centers for Medicare and Medicaid Services

If you are on Medicare Part B or Medicare Part D, you will receive an “Initial IRMAA Determination Notice” from Social Security. It can arrive any time after you are enrolled in either Part B or Part D. This notice will tell you how much you’ll have to pay for your IRMAA. It’s very important that you keep this notice, especially if you need to refer back to it for appeals. (See the “How to Appeal IRMAA” section below for more information.)

Who Pays IRMAA?

As noted above, only individuals who earn more than $85,000 and married couples filing jointly who earn more than $170,000 are required to pay IRMAA.

IRMAA affects less than 5 percent of people with Medicare, so, comparatively speaking, not many people will have to worry about the added expense. The numbers get even lower as you go into the higher tiers of IRMAA payers. However, in 2015, there were at least 39 million beneficiaries of either Medicare Part B or Medicare Part D, and some people paid into both.

How to Pay IRMAA

As IRMAA isn’t technically part of your plan premium, you don’t pay IRMAA to your plan’s provider. Instead, IRMAA is paid to Medicare (the Centers for Medicare and Medicaid Services) itself.

If IRMAA isn’t taken out of your Social Security check, you’ll get a bill from Medicare or the Railroad Retirement Board (RRB), if you get benefits from them rather than Social Security. Look for something called a “Notice of Medicare Premium Payment Due” (CMS-500) every month.

There are many ways to pay your Medicare bill:

  1. Pay via your bank account or using your bank’s online bill payment service. Unfortunately, not all banks offer this service.
  2. Register to use Medicare Easy Pay, which deducts your payment from your bank account at no charge each month, usually on the 20th.
  3. Send a check or money order. Enclose your payment coupon, and mail the payment to:
    Medicare Premium Collection Center
    P.O. Box 790355
    Louis, MO 63179-0355
  4. Make a payment with a credit or debit card. There should be a payment coupon on the paper copy of your Medicare bill where you can fill out your payment account information.

If you get your bill from the RRB, you won’t be able to pay your IRMAA with any of the methods listed above. Instead, you or your bank will have to mail your payments and payment coupons to:

RRB, Medicare Premium Payments
P.O. Box 979024
St. Louis, MO 63197-9000

If you don’t pay your IRMAA (or your base premium amount), you’ll get two notices before receiving a delinquent notice. Each notice is due on the 25th of the month in which it was sent. If the billing notice date is after the 25th, then the due date will be on the 25th of the next month. (For example: If you receive a bill on May 30, you’ll have to pay it by June 25.) If you are late after the delinquent notice, your coverage will be cancelled.

How to Appeal IRMAA

If you think that your IRMAA is too high, then we have some good news for you: You have options to reduce it.

  1. If you believe that the federal government might have made an error on your Initial IRMAA Determination Notice, you may formally request an appeal by completing a “Request for Reconsideration” form (Form SSA-561-U2). You can find the appeal form online or call the Social Security Administration directly at 1-800-772-1213 for a paper copy.Do not use this option if you know that the MAGI that the SSA has on file for you is incorrect. If this pertains to you, see Step 3.
    #
    This reconsideration will allow you to undergo another IRMAA determination. If the reconsideration is in your favor, your IRMAA will be corrected. If it’s denied, you can follow the directions on your denial papers to appeal to an administrative law judge (ALJ) within 60 days of the date printed on the reconsideration denial papers. A lawyer can also assist you with the appeal process.
    #
    If the ALJ appeal is unsuccessful, you have 60 days to make your case to the Medicare Appeals Council (MAC). If the MAC appeal is unsuccessful, your final recourse will be to appeal to the Federal District Court within 60 days of the council’s denial.
  2. You can also get a new Initial IRMAA Determination if something major happens in your life that would cause your income to decrease. These life-changing events can include:
    • Marriage
    • Divorce/annulment
    • Death of a spouse
    • Loss of income or certain reductions (from work, income-producing properties, or pensions)

    #
    This option is quite common for many people who feel that their reported income from two years ago was accurate but are currently having trouble paying for their expenses. People in this situation are not IRMAA’s intended payers. IRMAA’s intended payer system was designed to only include the most affluent enrollees of Medicare Part B and Medicare Part D. If you find that you are having a lot of trouble paying for IRMAA, you should obtain and submit Form SSA-44 from the Social Security Administration’s website.

  3. If you think, specifically, that the MAGI amount on which your IRMAA is based is incorrect, you will have to contact the Internal Revenue Service (IRS) directly. The government determines your MAGI based on the information you have filed with the IRS. You can contact your local IRS office using the Taxpayer Assistance Center Office Locator.
    #
    If you are successful in amending your MAGI, you’ll need a letter and transcript from the IRS stating that they have received the outdated, incorrect information and the new information. You should then contact the SSA directly and present them with the updated documentation.

Medicare Supplement (Medigap)

A good takeaway from all of this is that, well, IRMAA can be a hassle. Just because you’ve made a decent amount of money two years ago doesn’t mean you don’t also have a ton of expenses to worry about as well, right?

Here’s the thing, though: The only way to avoid IRMAA, if you’re eligible, is to not use Medicare Part B or Part D. But there might be more cost-effective options for you out there through Medicare Advantage and Medicare Supplement (or Medigap) plans. Once you turn 65, you’ll have a six-month open enrollment period to sign up for Medigap plans. After this point, you could be denied coverage. Also, many Medigap policies will often charge you higher premiums if you sign up later.

Medigap plans can vary greatly in cost and services offered. Barring a major life change or a bureaucratic error, you’re most likely not going to get your IRMAA lowered, which might, partially, be why you’re reading this. However, what you can do is find a Medicare Supplement or Medicare Advantage plan that might be more cost-efficient and a better fit for your needs.

That’s where HealthMarkets can help. We have more than 3,000 licensed insurance agents who can assist you in understanding how fees are calculated and help find ways to reduce your costs to fit your needs. Contact us at (800) 488-7621, or search to find one of our friendly agents near you today. We’ll be happy to go over all your Medicare options with you and answer any questions you might have.

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References

https://www.medicare.gov/what-medicare-covers/part-b/what-medicare-part-b-covers.html | https://www.medicare.gov/part-d/index.html | https://www.medicare.gov/your-medicare-costs/part-b-costs/part-b-costs.html | https://www.medicare.gov/part-d/costs/premiums/drug-plan-premiums.html | https://www.ssa.gov/foia/piadocuments/FY07/Medicare%20Modernization%20Act%20(MMA)%20FY07.htm | http://kff.org/medicare/issue-brief/income-relating-medicare-part-b-and-part/ | https://web.archive.org/web/20170120050347/http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/jointcommitteereport.pdf | https://www.ssa.gov/pubs/EN-05-10536.pdf | https://www.medicare.gov/part-d/costs/premiums/drug-plan-premiums.html | https://www.irs.com/articles/adjusted-gross-income-agi-vs-modified-adjusted-gross-income-magi http://www.fool.com/knowledge-center/how-to-calculate-your-adjusted-gross-income.aspx | https://q1medicare.com/q1group/MedicareAdvantagePartD/Blog.php?blog=Roughly-a-4-5–increase-in-the-2017-Income-Related-Medicare-Adjustment-Amounts–IRMAA–for-Medicare-beneficiaries-with-higher-annual-incomes-&blog_id=578&frompage=16 | http://www.usatoday.com/story/money/columnist/powell/2016/11/16/medicare-part-b-premiums-rise-survival-strategies-2017/93827564/ | https://www.medicare.gov/forms-help-and-resources/mail-about-medicare/irmaa-determination.html | http://www.ncpssm.org/Medicare/MedicareFastFacts | http://kff.org/medicare/report/medicare-part-d-at-ten-years-the-2015-marketplace-and-key-trends-2006-2015/ | https://www.medicare.gov/pubs/pdf/Understanding%20CMS%20500%20English.pdf | https://www.medicare.gov/forms-help-and-resources/mail-about-medicare/notice-of-medicare-premium-payment-due.html | https://www.ssa.gov/pubs/EN-05-10536.pdf | https://www.medicareinteractive.org/get-answers/medicare-rights-and-appeals/premium-appeals/appealing-a-higher-part-b-or-part-d-premium-irmaa | https://apps.irs.gov/app/officeLocator/index.jsp | https://secure.ssa.gov/poms.nsf/lnx/0601120050 | http://time.com/money/3598064/why-need-medigap-insurance/ | https://www.medicare.gov/find-a-plan/staticpages/learn/how-insurance-companies-price-policies.aspx#;return%20false; | http://www.lifehealthpro.com/2016/06/20/reducing-medicare-premiums-for-clients-who-had-hig

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